Although well thought upfront, the alignment of an organization’s strategy with their decision to outsource tends sometimes to be focused on short-term attainment of the organization’s bottom line and cost reduction targets. There are seven fundamental steps an organization may wish to follow to ensure the alignment with its strategy materializes it.
Last month I wrote about 13 game changers for successful outsourcing relationships. Today, I want to emphasize the importance for game changer No.1 – alignment with the organization’s strategy.
Although well thought upfront, the alignment of an organization’s strategy with its decision to outsource tends to be focused on short-term attainment of the organization’s bottom line and cost reduction targets.
However, there are seven steps an organization may wish to follow to ensure the alignment with its strategy materializes after the organization decides to outsource:
Step 1 – strategy is much more than brainstorming: a recent article published on the Harvard Business Review by Ken Favaro from consulting firm Strategy& (formerly Booz & Company) clearly defines three types of strategies for an organization:
• Corporate strategy – related to the organization’s capabilities, competitive advantages and business it is in.
• Business unit strategy – related to target markets, products and services provided to its clients.
• Implementation strategy – consists of all of the decision and activities an organization needs to execute in order to achieve the organization’s corporate and business units strategies.
When an organization is able to align all of the elements above, outsourcing makes more sense. As a reference, there are great books out there like the well-known and celebrated Good to Great from Jim Collins in which real examples of organizations being able to turn dreams into reality are provided.
Step 2 – are quick wins achievable? Having quick wins mapped and well executed will definitely boost the organization’s confidence throughout all of its strategic decisions and milestones. Like in any change, having reassurance of the organization’s strategic decisions materialized into outcomes will help to generate the much needed momentum and stamina required in order to promote a complex change like outsourcing. Therefore, quick wins should be a top priority within the first 90 days.
Step 3 – are lessons learned being leveraged? Throughout a complex change like outsourcing, an organization may make mistakes along the way. Instead of focusing on what went wrong, a suggestion is to turn those into effective lessons for the organization’s team – as you want to continue to generate momentum and demonstrate support throughout the entire sourcing lifecycle. Another benefit is the “bond” it generates within the organization’s team involved. If an organization is able to quickly address/resolve issues, the benefits of outsourcing tend to be visible in spite of any challenges.
Step 4 – are you tracking progress and promoting adjustments in a timely manner? Changes to an original plan might be required in order to attain the desirable outcomes. Organizations may face the challenge on what is their real progress within their strategy – and whether or not their initial timeline still holds. In case it does not, a potential reassessment of the timelines adjustments against benefits and risks might be useful to determine the net impact of any changes required. Most importantly, an organization should have a clear guideline for risk management. For example, if an organization’s business unit strategy is poorly managed and somewhat contrary to outsourcing, it will be very hard to manage/attain success.
Step 5 – are you attaining the desirable outcomes for the organization?Another consideration is to be clear about the outcomes managed to date and consider if those are representative of the organization’s strategy. Although time consuming, one should ensure that things such as the organization’s vision/values as well as costs are accounted for. Furthermore, organizations should not underestimate what it takes to make outsourcing a successful value proposition, and manage expectations within their teams and accordingly.
Step 6 – are you monitoring external factors related to your decision? In today’s global economy, organizations should be monitoring potential external factors that may impact their decision to outsource. For example, currency risks and inflation levels on developing countries where service providers have delivery centers. Although indirectly related, external factors can lead to reputational risks, which may impact to the organization’s brand and strategy. Once the outsourcing agreement is in place, the ongoing monitoring of those external factors should continue.
Step 7 – are you ready to execute? The right balance between a company’s vision and reality should be attained in order to succeed. Organizations that do not have the right approach to manage such a complex change tend to suffer the consequences of a poorly managed implementation strategy. Furthermore, it will lead to a misconception that outsourcing does not suit the organization’s corporate and business strategies. Although it is hard to be in that position, a turnaround is achievable so long as the above steps are being considered going forward.
At the end of day, you are not alone if you thought outsourcing is harder than it looks. The above steps are outsourcing enablers, as those can let you assess the outsourcing alignment with the organization’s strategy.